eroding model for health insurance Part 1

[Guest guest]

An eroding model for health insurance

Working Americans once could rely on employer-based benefits. But more

people are being forced into the individual market, where coverage is

costly, bare-bones and precarious.

By Girion and A. Hiltzik October 21, 2008

First of three parts

and Greg Danylyshyn of Pasadena are conscientious parents.

They keep proper car seats in their used BMW, organic vegetables in

the family diet and the pediatrician's number by the phone.

They don't have access to the group medical insurance offered by many

employers. She's a stay-at-home mom. He's a self-employed music

supervisor in the TV and film industry. So they buy individual

policies for each family member.

As careful consumers, they shopped for the best deals, weighed premium

costs against benefits and always assumed they could keep their family

covered.

Then last spring Blue Shield of California stunned them with a

rejection notice. Baby Ava, their happy, healthy 7-pounder, was born

with a minor hip joint misalignment. Her pediatrician said it was

nothing serious and probably temporary.

Still, Blue Shield declared the infant uninsurable. The company

foresaw extra doctor visits, " the need for monitoring and an X-ray. "

Ava's slight imperfection " exceeds . . . eligibility criteria for

acceptance, " Blue Shield said.

" I was enraged, baffled; I just could not understand, " recalled

, 36.

The family's experience is symptomatic of the nation's healthcare

crisis. Ineligible for group insurance, millions of Americans are

paying more for individual policies that offer less coverage and

expose them to seemingly arbitrary exclusions and denials.

The health insurance system has become increasingly expensive and

inaccessible. It leaves patients responsible for bills they understood

would be covered, squeezes doctors and hospitals, and tries to avoid

even minuscule risks, such as providing coverage to a newborn with no

serious illness.

At the heart of the problem is the clash between the cost of medical

care and insurers' need to turn a profit.

Today, four publicly traded corporations -- WellPoint Inc.,

UnitedHealth Group, Aetna Inc. and Cigna Corp. -- dominate the market,

covering more than 85 million people, or almost half of all Americans

with private insurance.

On Wall Street, they showcase their efforts to hold down expenses and

maximize shareholder returns by excluding customers likely to need

expensive care, including those with chronic diseases such as asthma

and diabetes. The companies lobby governments to take over

responsibility for their sickest customers so they can reserve the

healthiest (and most profitable) for themselves.

Meanwhile, insurance premiums are becoming a heavier burden on

employers, many of which say that rising healthcare costs cut into

their ability to compete and, in some cases, to survive.

As a result, the percentage of Americans covered by traditional group

health insurance has steadily declined. Nearly 46 million have no

insurance at all. Medical debt has become a leading cause of personal

bankruptcy and a growth business for collection agencies.

Even some top insurance executives agree the system is inefficient and

sometimes inhumane.

Bruce Bodaken, chief executive of Blue Shield of California, says that

universal coverage is the answer.

Bodaken says government should mandate that everyone obtain health

insurance and that insurers sell to all comers regardless of their

health -- similar to a plan proposed by Gov. Arnold Schwarzenegger and

defeated in the state Legislature last year.

The rationale of universal coverage, the norm in other industrialized

countries, is that costs are manageable when everyone is covered

because the risk pool includes the young and healthy to offset the

older and sicker.

" One of the basic goals of universal coverage should be to change the

health coverage business from avoiding risk to balancing health risks

and focusing primarily on quality, service and cost-effective

delivery, " Bodaken wrote recently in the policy journal Health Affairs.

In the absence of such a system, and with group coverage increasingly

unavailable, more and more Americans are left to rely on individual

health policies. They are more expensive for all but the young and

healthy and often provide fewer benefits.

They also are lightly regulated. Unlike group plans, which must accept

all qualified applicants and can't base a member's premium on his or

her medical history, individual plans in most states (including

California) are free to cherry-pick the healthiest customers.

Insurers can reject applicants for even mild preexisting conditions.

People have been turned down for individual policies because they have

hay fever, have suffered from jock itch or use common medicines such

as cholesterol-lowering drugs, records and interviews show. Even those

lucky enough to have insurance are uncertain they can keep it or count

on it in a crisis.

Sens. Barack Obama and McCain both have released proposals for

curbing costs and broadening access to health coverage, but both

presidential candidates would preserve the private insurance industry

as the system's backbone.

Cherry-picking

During her pregnancy, Danylyshyn's regular visits to her

obstetrician were covered by her Blue Shield policy. So was the

delivery of Ava on March 24. The couple expected that Ava would be

covered as a matter of course.

When the company rejected the baby because of the hip misalignment,

her parents appealed with the help of their pediatrician.

" Certainly, this cannot be a condition which warrants the denial of

insurance benefits; especially to this beautiful, healthy baby girl, "

wrote Dr. A. Heller.

Blue Shield refused to budge.

Meanwhile, the Danylyshyns kept to their well-baby schedule. Ava

received her regular checkups, weigh-ins and vaccinations. But the

doctor bills went to the couple's two-bedroom Pasadena bungalow, not

to Blue Shield.

Then, before Ava began to crawl, her joint problem corrected itself.

Presented with a clean bill of health from an orthopedic specialist,

Blue Shield agreed to insure Ava -- after six months and more than

$2,000 in unreimbursed care.

The insurer agreed to cover only Ava's future medical needs. The tab

for the care she had already received was her parents' responsibility.

Blue Shield spokesman Tom Epstein called Ava's case " a good example of

what's wrong with the current system and why it needs to be fixed. "

Insurers insist that they can't stay in business without excluding

chronic disease sufferers, known in the industry as " clinical train

wrecks. " But companies in the individual market also want to avoid

even marginal risk -- adopting a practice some insiders call " hangnail

underwriting. "

Even nonprofits such as Blue Shield of California are obliged to

follow prevailing market practices, lest they be swamped with the

highest-cost customers.

" That's the game, " said Ehnes, director of the California

Department of Managed Health Care. Risk selection, she said, " must be

part of every insurer's strategy or else they potentially will get all

the bad risk. "

Such cherry-picking tripped up Pam Munter when she applied for

individual coverage two years ago. She had retired from a clinical

psychology practice in Oregon and moved to California, where her

insurance applications were rejected, one after another.

The reason: She takes Prevacid for gastroesophageal reflux disease. It

is a widely prescribed drug with annual sales exceeding $3 billion.

In Oregon, Munter paid $400 a month for health insurance. In

California, the only coverage she could get was through the state-run

high-risk pool. She paid $1,000 a month for a policy with a benefit

limit of $75,000 a year, and was lucky to get it. California often has

a long waiting list for the high-risk pool.

Medicare came to Munter's rescue when she turned 65. Now she pays less

than $250 a month.

Rejection and rescission

Rudy Rivas is on the front line of the healthcare system. He sells

medical insurance from a home office in Whittier and counsels

customers at his kitchen table. These days demand is high, but so are

rejections.

On a recent day, he hung up the phone after talking to a woman in her

50s who had lost her job and her group health insurance coverage along

with it. He couldn't find an insurer willing to take her on because of

a preexisting medical condition.

" She's not indigent. She owns her own house. She doesn't qualify for

Medi-Cal. What can she do? " Rivas said. " This is a common call that

we're having. It's tough. "

Rivas doesn't blame the insurers. But he spends a lot of time

explaining to clients the harsh realities of the individual market.

" Insurance is about one thing -- adverse risk, " Rivas said. " If I'm a

carrier and I started taking on people who are 5-foot-10 and over 265

pounds, I'm going to get all the people who are overweight. And I

can't keep my doors open that way. "

Another way that insurers keep medical losses down is by jettisoning

customers they say did not qualify for coverage in the first place.

Several insurance companies have established departments dedicated to

reviewing the applications of customers who file costly medical

claims. The goal is to discover evidence that the clients failed to

disclose preexisting conditions when they applied. Insurers cite such

omissions as grounds to cancel policies retroactively, a process known

as rescission.

Health Net Inc. of Woodland Hills, a nationwide insurer with 6.7

million members, avoided spending $35.5 million by canceling the

policies of about 1,600 California customers over six years, according

to company documents disclosed last year by the Los Angeles Times.

The documents showed that Health Net paid bonuses to an employee

based, in part, on how many policies of sick enrollees she canceled.

An arbitrator this year awarded $9 million to one Health Net customer

-- a Gardena hair salon owner who was undergoing chemotherapy for

breast cancer when her policy was canceled.

Public controversy, political pressure and legal challenges are

forcing insurers to tread more carefully in rescinding policies.

However, rescission remains a powerful tool that the industry is

fighting to retain.

" Rescission . . . helps protect against fraud in the individual

market, " said Ohman, president of the California Assn. of Health

Plans.

Losing coverage

Sally Marrari thought she was covered when she was admitted to

Cedars-Sinai Medical Center complaining of sharp pain and shortness of

breath. A few months earlier, she and her husband, Rick, who own an

auto repair shop in Los Angeles, had taken out a family insurance policy.

She spent three days at Cedars-Sinai undergoing tests and was later

diagnosed with lupus, a chronic, arthritis-like disease. When the

hospital's $25,000 bill came due in late 2006, Anthem Blue Cross of

California refused to pay -- and then rescinded Marrari's coverage.

" They told me they canceled me because I was lying, " recalled Marrari,

51, of Playa del Rey.

After reviewing Marrari's application, Anthem said she had failed to

report having taken an antidepressant years earlier. The company said

she also omitted mention of a digestive disorder, an iron deficiency

and back pain.

Marrari said she didn't know she had a digestive disorder or an iron

deficiency when she filled out the application. As for the back pain,

she understood it to be a side effect from a hysterectomy, which she

says she did list on her application.

Marrari said she took the antidepressant Prozac under a doctor's care

after her father died a decade ago. She stopped using the medication

after a year.

" They asked if I had mental problems, and I said no, which is true, "

she said. " I don't have mental problems. "

Marrari, one of 6,000 Anthem Blue Cross of California customers who

have lost coverage in recent years, is suing the insurer in an effort

to have her policy reinstated.

Anthem declined to discuss her case.

Without insurance, Marrari's medical treatment has been expensive and

intermittent. She and her husband managed to pay the $25,000 bill from

Cedars-Sinai, she said, and they have spent another $25,000 or more on

her care, including an annual $1,000 scan to see whether fluid has

built up around her heart, a risk with lupus.

She sought treatment in Mexico, borrowed money from her in-laws to pay

for tests, and is compensating one specialist by repairing the

doctor's vintage Porsche and giving it a new paint job.

Marrari says she can't afford prescription pain medications so she

simply lives with the pain. Sometimes it becomes overwhelming. One day

last summer Marrari sought relief at the emergency room of St. 's

Hospital in Santa . She got a bill for $10,000.

" I cried, " she said. " I'm trying to get them to reduce it. "

Skimming the risk pool

Insurers trying to lure the healthiest and most profitable customers

are devising cheap, stripped-down policies aimed at younger buyers.

Tonik, for example, offers a line of low-priced individual plans with

deductibles as high as $5,000 a year. It is a product of WellPoint

Inc., the parent of Anthem Blue Cross of California, and promises

starting premiums as low as $74 a month.

The plan provides no maternity care, excludes most mental health

coverage and is limited to generic drugs.

Tonik epitomizes policies aimed at " young invincibles " -- men ages 19

to 29. They are least prone to chronic diseases, rarely go in for

checkups and typically don't have families. All but the most serious

medical claims are likely to fall short of Tonik's high deductibles.

WellPoint contends that such plans bolster the country's healthcare

system by drawing in customers who otherwise might not buy any insurance.

But there are hidden costs to skimming the healthiest customers from

the risk pool. Those left behind pay more. Or they go without

insurance, meaning that taxpayers foot the bill for their care.

California Lt. Gov. Garamendi said that 60% of all deliveries in

California were covered by Medi-Cal, the government health program for

the indigent.

" Why should we cover pregnant women? " asked Garamendi, a former state

insurance commissioner. " Because the cost of an unhealthy child

remains in the community. Why is that? Because insurance companies

have shed the risk. "

'A matter of economics'

Premiums on all forms of insurance have surged in recent years.

Between 2002 and 2007, premiums rose 78%, outpacing inflation (17%)

and wages (19%). In the individual market, without an employer's

subsidy, consumers bear the full cost of coverage.

Most states don't regulate how premiums are set. As a result, women

tend to pay more than men (because they have higher medical expenses

on average). Rates also go up with age. For many people older than 50,

premiums can rival mortgage or rent payments.

When and Koerner of rural Pennsylvania, both in their

50s, couldn't afford individual policies, they gambled -- and prayed

that their health and good luck would hold until Medicare kicked in.

The Koerners sell gifts and custom T-shirts at fairs and street

festivals in northeastern Pennsylvania and in their store, Cosmos

Crystal Shop, in Carbondale.

" We've been lucky playing the Russian roulette game with not having

any health insurance and basically trying to be as careful as you

can, " Koerner said.

One day about two years ago, he was using a hydraulic splitter to

replenish the wood pile that heats their home. Something slipped. His

left thumb was severed.

He tried to stop the bleeding with rubber bands, packed the amputated

digit in ice to " increase my chances of reattachment " and got a

neighbor to drive him to the local hospital.

Doctors in the emergency room cleaned and stitched the wound, but he

would have to be airlifted to a bigger hospital for reattachment surgery.

Koerner loves working with his hands. He is a trained goldsmith and

silversmith, repairs his car and enjoys sculpting. He knew he would

miss his thumb. But there were " too many other bills to pay. "

He left his thumb at the hospital.

" It was plain a matter of economics, " Koerner said. " I knew I could

live without it. "

http://www.latimes.com/business/la-fi-insure21-2008oct21,0,6869686.story

[Guest guest]

Oh, no! We can't have universal health care insurance. That would be the dreaded socialism. Like the recent financial bailout isn't socialism? WTF?

Do one thing every day that scares you.

Eleanor Roosevelt

From: <rumjal@...>Subject: [Flu] eroding model for health insurance Part 1Flu Date: Tuesday, October 21, 2008, 1:17 PM

An eroding model for health insuranceWorking Americans once could rely on employer-based benefits. But morepeople are being forced into the individual market, where coverage iscostly, bare-bones and precarious.By Girion and A. Hiltzik October 21, 2008First of three parts and Greg Danylyshyn of Pasadena are conscientious parents.They keep proper car seats in their used BMW, organic vegetables inthe family diet and the pediatrician' s number by the phone.They don't have access to the group medical insurance offered by manyemployers. She's a stay-at-home mom. He's a self-employed musicsupervisor in the TV and film industry. So they buy individualpolicies for each family member.As careful consumers, they shopped for the best deals, weighed premiumcosts against benefits and always assumed they could keep their familycovered.Then last spring Blue Shield of

California stunned them with arejection notice. Baby Ava, their happy, healthy 7-pounder, was bornwith a minor hip joint misalignment. Her pediatrician said it wasnothing serious and probably temporary.Still, Blue Shield declared the infant uninsurable. The companyforesaw extra doctor visits, "the need for monitoring and an X-ray."Ava's slight imperfection "exceeds . . . eligibility criteria foracceptance," Blue Shield said."I was enraged, baffled; I just could not understand," recalled, 36.The family's experience is symptomatic of the nation's healthcarecrisis. Ineligible for group insurance, millions of Americans arepaying more for individual policies that offer less coverage andexpose them to seemingly arbitrary exclusions and denials.The health insurance system has become increasingly expensive andinaccessible. It leaves patients responsible for bills they

understoodwould be covered, squeezes doctors and hospitals, and tries to avoideven minuscule risks, such as providing coverage to a newborn with noserious illness.At the heart of the problem is the clash between the cost of medicalcare and insurers' need to turn a profit.Today, four publicly traded corporations -- WellPoint Inc.,UnitedHealth Group, Aetna Inc. and Cigna Corp. -- dominate the market,covering more than 85 million people, or almost half of all Americanswith private insurance.On Wall Street, they showcase their efforts to hold down expenses andmaximize shareholder returns by excluding customers likely to needexpensive care, including those with chronic diseases such as asthmaand diabetes. The companies lobby governments to take overresponsibility for their sickest customers so they can reserve thehealthiest (and most profitable) for themselves.Meanwhile,

insurance premiums are becoming a heavier burden onemployers, many of which say that rising healthcare costs cut intotheir ability to compete and, in some cases, to survive.As a result, the percentage of Americans covered by traditional grouphealth insurance has steadily declined. Nearly 46 million have noinsurance at all. Medical debt has become a leading cause of personalbankruptcy and a growth business for collection agencies.Even some top insurance executives agree the system is inefficient andsometimes inhumane.Bruce Bodaken, chief executive of Blue Shield of California, says thatuniversal coverage is the answer.Bodaken says government should mandate that everyone obtain healthinsurance and that insurers sell to all comers regardless of theirhealth -- similar to a plan proposed by Gov. Arnold Schwarzenegger anddefeated in the state Legislature last year.The rationale of

universal coverage, the norm in other industrializedcountries, is that costs are manageable when everyone is coveredbecause the risk pool includes the young and healthy to offset theolder and sicker."One of the basic goals of universal coverage should be to change thehealth coverage business from avoiding risk to balancing health risksand focusing primarily on quality, service and cost-effectivedelivery," Bodaken wrote recently in the policy journal Health Affairs.In the absence of such a system, and with group coverage increasinglyunavailable, more and more Americans are left to rely on individualhealth policies. They are more expensive for all but the young andhealthy and often provide fewer benefits.They also are lightly regulated. Unlike group plans, which must acceptall qualified applicants and can't base a member's premium on his orher medical history, individual plans in most

states (includingCalifornia) are free to cherry-pick the healthiest customers.Insurers can reject applicants for even mild preexisting conditions.People have been turned down for individual policies because they havehay fever, have suffered from jock itch or use common medicines suchas cholesterol- lowering drugs, records and interviews show. Even thoselucky enough to have insurance are uncertain they can keep it or counton it in a crisis.Sens. Barack Obama and McCain both have released proposals forcurbing costs and broadening access to health coverage, but bothpresidential candidates would preserve the private insurance industryas the system's backbone.Cherry-pickingDuring her pregnancy, Danylyshyn's regular visits to herobstetrician were covered by her Blue Shield policy. So was thedelivery of Ava on March 24. The couple expected that Ava would becovered as

a matter of course.When the company rejected the baby because of the hip misalignment,her parents appealed with the help of their pediatrician."Certainly, this cannot be a condition which warrants the denial ofinsurance benefits; especially to this beautiful, healthy baby girl,"wrote Dr. A. Heller.Blue Shield refused to budge.Meanwhile, the Danylyshyns kept to their well-baby schedule. Avareceived her regular checkups, weigh-ins and vaccinations. But thedoctor bills went to the couple's two-bedroom Pasadena bungalow, notto Blue Shield.Then, before Ava began to crawl, her joint problem corrected itself.Presented with a clean bill of health from an orthopedic specialist,Blue Shield agreed to insure Ava -- after six months and more than$2,000 in unreimbursed care.The insurer agreed to cover only Ava's future medical needs. The tabfor the care she had already

received was her parents' responsibility.Blue Shield spokesman Tom Epstein called Ava's case "a good example ofwhat's wrong with the current system and why it needs to be fixed."Insurers insist that they can't stay in business without excludingchronic disease sufferers, known in the industry as "clinical trainwrecks." But companies in the individual market also want to avoideven marginal risk -- adopting a practice some insiders call "hangnailunderwriting. "Even nonprofits such as Blue Shield of California are obliged tofollow prevailing market practices, lest they be swamped with thehighest-cost customers."That's the game," said Ehnes, director of the CaliforniaDepartment of Managed Health Care. Risk selection, she said, "must bepart of every insurer's strategy or else they potentially will get allthe bad risk."Such cherry-picking tripped up Pam Munter when she

applied forindividual coverage two years ago. She had retired from a clinicalpsychology practice in Oregon and moved to California, where herinsurance applications were rejected, one after another.The reason: She takes Prevacid for gastroesophageal reflux disease. Itis a widely prescribed drug with annual sales exceeding $3 billion.In Oregon, Munter paid $400 a month for health insurance. InCalifornia, the only coverage she could get was through the state-runhigh-risk pool. She paid $1,000 a month for a policy with a benefitlimit of $75,000 a year, and was lucky to get it. California often hasa long waiting list for the high-risk pool.Medicare came to Munter's rescue when she turned 65. Now she pays lessthan $250 a month.Rejection and rescissionRudy Rivas is on the front line of the healthcare system. He sellsmedical insurance from a home office in Whittier and

counselscustomers at his kitchen table. These days demand is high, but so arerejections.On a recent day, he hung up the phone after talking to a woman in her50s who had lost her job and her group health insurance coverage alongwith it. He couldn't find an insurer willing to take her on because ofa preexisting medical condition."She's not indigent. She owns her own house. She doesn't qualify forMedi-Cal. What can she do?" Rivas said. "This is a common call thatwe're having. It's tough."Rivas doesn't blame the insurers. But he spends a lot of timeexplaining to clients the harsh realities of the individual market."Insurance is about one thing -- adverse risk," Rivas said. "If I'm acarrier and I started taking on people who are 5-foot-10 and over 265pounds, I'm going to get all the people who are overweight. And Ican't keep my doors open that way."Another way that insurers

keep medical losses down is by jettisoningcustomers they say did not qualify for coverage in the first place.Several insurance companies have established departments dedicated toreviewing the applications of customers who file costly medicalclaims. The goal is to discover evidence that the clients failed todisclose preexisting conditions when they applied. Insurers cite suchomissions as grounds to cancel policies retroactively, a process knownas rescission.Health Net Inc. of Woodland Hills, a nationwide insurer with 6.7million members, avoided spending $35.5 million by canceling thepolicies of about 1,600 California customers over six years, accordingto company documents disclosed last year by the Los Angeles Times.The documents showed that Health Net paid bonuses to an employeebased, in part, on how many policies of sick enrollees she canceled.An arbitrator this year awarded $9 million

to one Health Net customer-- a Gardena hair salon owner who was undergoing chemotherapy forbreast cancer when her policy was canceled.Public controversy, political pressure and legal challenges areforcing insurers to tread more carefully in rescinding policies.However, rescission remains a powerful tool that the industry isfighting to retain."Rescission . . . helps protect against fraud in the individualmarket," said Ohman, president of the California Assn. of HealthPlans.Losing coverageSally Marrari thought she was covered when she was admitted toCedars-Sinai Medical Center complaining of sharp pain and shortness ofbreath. A few months earlier, she and her husband, Rick, who own anauto repair shop in Los Angeles, had taken out a family insurance policy.She spent three days at Cedars-Sinai undergoing tests and was laterdiagnosed with lupus, a chronic,

arthritis-like disease. When thehospital's $25,000 bill came due in late 2006, Anthem Blue Cross ofCalifornia refused to pay -- and then rescinded Marrari's coverage."They told me they canceled me because I was lying," recalled Marrari,51, of Playa del Rey.After reviewing Marrari's application, Anthem said she had failed toreport having taken an antidepressant years earlier. The company saidshe also omitted mention of a digestive disorder, an iron deficiencyand back pain.Marrari said she didn't know she had a digestive disorder or an irondeficiency when she filled out the application. As for the back pain,she understood it to be a side effect from a hysterectomy, which shesays she did list on her application.Marrari said she took the antidepressant Prozac under a doctor's careafter her father died a decade ago. She stopped using the medicationafter a year."They asked if

I had mental problems, and I said no, which is true,"she said. "I don't have mental problems."Marrari, one of 6,000 Anthem Blue Cross of California customers whohave lost coverage in recent years, is suing the insurer in an effortto have her policy reinstated.Anthem declined to discuss her case.Without insurance, Marrari's medical treatment has been expensive andintermittent. She and her husband managed to pay the $25,000 bill fromCedars-Sinai, she said, and they have spent another $25,000 or more onher care, including an annual $1,000 scan to see whether fluid hasbuilt up around her heart, a risk with lupus.She sought treatment in Mexico, borrowed money from her in-laws to payfor tests, and is compensating one specialist by repairing thedoctor's vintage Porsche and giving it a new paint job.Marrari says she can't afford prescription pain medications so shesimply lives with

the pain. Sometimes it becomes overwhelming. One daylast summer Marrari sought relief at the emergency room of St. 'sHospital in Santa . She got a bill for $10,000."I cried," she said. "I'm trying to get them to reduce it."Skimming the risk poolInsurers trying to lure the healthiest and most profitable customersare devising cheap, stripped-down policies aimed at younger buyers.Tonik, for example, offers a line of low-priced individual plans withdeductibles as high as $5,000 a year. It is a product of WellPointInc., the parent of Anthem Blue Cross of California, and promisesstarting premiums as low as $74 a month.The plan provides no maternity care, excludes most mental healthcoverage and is limited to generic drugs.Tonik epitomizes policies aimed at "young invincibles" -- men ages 19to 29. They are least prone to chronic diseases, rarely go in forcheckups and

typically don't have families. All but the most seriousmedical claims are likely to fall short of Tonik's high deductibles.WellPoint contends that such plans bolster the country's healthcaresystem by drawing in customers who otherwise might not buy any insurance.But there are hidden costs to skimming the healthiest customers fromthe risk pool. Those left behind pay more. Or they go withoutinsurance, meaning that taxpayers foot the bill for their care.California Lt. Gov. Garamendi said that 60% of all deliveries inCalifornia were covered by Medi-Cal, the government health program forthe indigent."Why should we cover pregnant women?" asked Garamendi, a former stateinsurance commissioner. "Because the cost of an unhealthy childremains in the community. Why is that? Because insurance companieshave shed the risk."'A matter of economics'Premiums on all forms of insurance

have surged in recent years.Between 2002 and 2007, premiums rose 78%, outpacing inflation (17%)and wages (19%). In the individual market, without an employer'ssubsidy, consumers bear the full cost of coverage.Most states don't regulate how premiums are set. As a result, womentend to pay more than men (because they have higher medical expenseson average). Rates also go up with age. For many people older than 50,premiums can rival mortgage or rent payments.When and Koerner of rural Pennsylvania, both in their50s, couldn't afford individual policies, they gambled -- and prayedthat their health and good luck would hold until Medicare kicked in.The Koerners sell gifts and custom T-shirts at fairs and streetfestivals in northeastern Pennsylvania and in their store, CosmosCrystal Shop, in Carbondale."We've been lucky playing the Russian roulette game with not havingany

health insurance and basically trying to be as careful as youcan," Koerner said.One day about two years ago, he was using a hydraulic splitter toreplenish the wood pile that heats their home. Something slipped. Hisleft thumb was severed.He tried to stop the bleeding with rubber bands, packed the amputateddigit in ice to "increase my chances of reattachment" and got aneighbor to drive him to the local hospital.Doctors in the emergency room cleaned and stitched the wound, but hewould have to be airlifted to a bigger hospital for reattachment surgery.Koerner loves working with his hands. He is a trained goldsmith andsilversmith, repairs his car and enjoys sculpting. He knew he wouldmiss his thumb. But there were "too many other bills to pay."He left his thumb at the hospital. "It was plain a matter of economics," Koerner said. "I knew I couldlive without it." http://www.latimes. com/business/ la-fi-insure21- 2008oct21, 0,6869686. story

[Guest guest]

That Which is Not Socialism Posted by Steve Coll

I flew to California Monday, on Virgin America, a snappy airline that

is so modern and young in its aesthetics that it makes a person of a

certain generation feel that he may be culturally unqualified to be a

passenger. One of the airline's selling points, however, is that it

allows you to watch live satellite television; I had CNN on without

sound while I read and worked, and when I glanced up I saw that the

network was running its campaign coverage above a big banner that

read, " Share the Wealth? McCain Slams Socialism. "

How did socialism become a notional subject of this Presidential

campaign? The use of the term originated with the dubious Joe the

Plumber episode, subject of my Comment in the magazine this week. But

just to be clear, headline writers of the world: socialism is not

language that Obama ever used or even remotely implied in describing

the principles of progressive taxation in his (and everyone else's,

including President W. Bush's) tax plan.

Instead, socialism is the term that McCain and his campaign advisers

have now decided to ride in a last desperate push to regain ground in

their campaign—because past Republican-led polling of terms such as

" socialized medicine " shows that the language raises hackles and has

unusually negative connotations for many Americans. Allowing McCain's

campaign to control headline and media language in this way is

analogous to running a banner that reads " Tough on Russia? Obama Slams

Nuclear War Threats. " Headline writers would know that such a take

would be unfair to the essence of McCain's statements about Russia;

why do they not display the same judgment here?

Obama and McCain disagree about what the top federal-tax rates on

individual income, corporate profits, and capital gains should be. The

two candidates do not disagree on the principle of progressive

taxation—McCain might be sympathetic to a flat tax, but he has not

come out for one; presumably, he is influenced by the fact that a

progressive system, in which the rich pay proportionately more than

the poor, is more popular politically than a flat tax would be. Within

the progressive system that they agree on, Obama thinks the top rates

should be higher than McCain thinks they should be. In the case of the

top federal-income-tax rate, the difference between them is not very

large—Obama wants to go up from Bush's thirty-five per cent top rate

to Clinton's top rate, a little over thirty-nine per cent. This is the

change Obama was discussing with Joe Wurzelbacher, the unlicensed

contractor who has become known as Joe the Plumber. Obama's plan means

that even for the richest of filers, the difference between his tax

system and McCain's concerns approximately $45,000 in additional taxes

for every $1 million wealthy filers earn in income after they reach

the highest possible bracket. That's enough to buy a small B.M.W.,

yes, but in the great scheme of things, this does not seem to qualify

as an argument about socialism.

If it did, then Nixon and Gerald Ford would be Bolsheviks. In

1975, when Gerald Ford was President, the top U.S. federal-income-tax

rate was seventy per cent—that's right, almost twice what it was under

Bill Clinton. In Sweden, the top rate in 1975 was eighty-seven per

cent; in Britain, eighty-three per cent; in Japan seventy-five per

cent; in Australia, sixty-five per cent; and in go-go capitalist

Canada, it was forty-seven per cent (it went up to about sixty per

cent a few years later.) It is difficult to compare these top rates

precisely because state and city taxes in the U.S. can add another ten

per cent or more, and the deductibility and income-qualification rules

in each country are different—but the top line provides a generally

accurate sense of how much income governments in industrialized

countries took from their wealthiest filers during the

nineteen-seventies: a lot.

The Reagan and Thatcher years did produce a major change in consensus

thinking about the politics and economics of top marginal tax rates.

The top rates—and all rates—in both America and Britain fell

dramatically by the end of the nineteen-eighties. (My colleague Sam

Sherraden, using comparative data assembled by economists at the

University of Michigan, put together this spreadsheet tracking the

evolution—or devolution—of top rates in the G-8 countries since the

nineteen-seventies.) This big change in top tax rates was not limited,

however, to the Anglo-Saxon economies with traditions of greater

individual liberty and more freewheeling markets. It spread gradually

across continental Europe and industrialized Asia and the Pacific as

global economic competition after the Cold War facilitated the free

flow of capital and threatened to punish any country that kept its tax

system too far out of alignment with the American-led norm. The

consensus also affirmed the potential of lower tax rates, in a

balanced and transparent regulatory system, to spur economic

innovation and economic growth, just as Reagan and Thatcher had

argued. The fierce disagreements about taxation that prevailed when

the world really was full of socialists subsided by the mid

nineteen-nineties into debates about nuance and technocratic

mechanisms—not principle.

So we come back to the essential falsity of this moment in the 2008

campaign. The principle of progressive taxation is agreed between the

two candidates. They also agree that, in principle, lower taxes can

spur economic growth and innovation. They disagree about which of

these two principles should be emphasized over the other at this time

of economic crisis and rising income inequality. They also disagree

about small fiddles on the tax-rate dial. In historical (and even

economic) terms, the differences between them concerning both economic

principles and specific tax-rate policies are trivial. To allow the

poll-savvy advisers of the McCain camp to make this a debate about

" socialism " is to capitulate to their manipulation.

http://www.newyorker.com/online/blogs/stevecoll/2008/10/that-which-is-n.html

>

> Oh, no! We can't have universal health care insurance. That would

be the dreaded socialism. Like the recent financial bailout isn't

socialism? WTF?